Bull vs Bear: Here’s what Morgan Stanley says about SpaceX

Quiet period over – now banks who led on getting the $86bn SpaceX IPO off the ground are weighing in with what they think the company is worth. 

Morgan Stanley’s analysts – led by long-term Tesla bull Adam Jonas, recently moved off the autos beat by the bank– make for some engaging reading.

“With an 'X of 1' position in space infrastructure, we believe SpaceX can convert energy into intelligence at scale with optionality to monetize through a range of consumer and enterprise solutions for the next era of AI… the final frontier,” they write in the first line of a 142-page document.

MS initiates at $300 but stresses an “intentionally wide” $75 bear case and $600 bull case, which they say balances the company’s unique ability to capture the expanding space and AI opportunity against material execution, funding, and technology risks.

This creates a neat way to fit this note into our Bull vs Bear series...

Bull: AI Ad Infinitum

How do you get to $300? “We see the company as one of the few platforms that can link real estate in orbit, global connectivity, and compute capacity into one infrastructure stack,” note the analysts.

It’s mainly about AI and connectivity. Based on a sum of parts discounted cash flow model that means just $8 is from Space, $152 from Enterprise AI, and $128 from Connectivity. But it’s all interconnected at the same time. Without the reusable rockets and cost of going to space collapsing you don’t get the AI and connectivity payback.

SpaceX is able to monetise Enterprise AI across three layers: neocloud compute rental, managed AI infrastructure, and full enterprise applications. In the near term they expect neocloud to drive the most growth given tight compute supply and recent deals with Anthropic and Google.

“We model AI revenue rising from approximately $22bn in 2026 to $190bn in 2030 and $2.6tn in 2040, with Enterprise AI representing the majority of the segment over time,” they say. Overall MS predicts revenue rising from $45bn in 2026 to $319bn in 2030 and $3.3tn in 2040, which they say “gives the company credit for creating all new TAMs for connectivity and physical AI service”.

There’s a fair chunk about ‘orbital compute’ in relation to SpaceXAI- data centres in space, which begin in 2028 and scale to 365GW by 2040. While the terrestrial compute story is “underappreciated” over the next 5 years, the driver of lower cost per watt longer term will be orbital compute.

Space – Starship – is really just an enabler for the rest of the business. “Starship is the main unlock for SpaceX’s long-term economics across Space, Connectivity, and AI,” says MS.

Why is Space such a small part of the valuation? MS note that “it's not intuitive that SpaceX’s most dominant, and arguably most important, franchise represents just 3% of our base case valuation”. They point out however that “the segment is largely treated as a cost centre for the broader company rather than a standalone launch-maximization business”. The majority of launch capacity is used internally, including potentially up to more than 90% of Starship launches from 2027 to 2040.

On Starlink, (the Connectivity layer/pillar), MS outlines revenue rising from $11.4bn in 2025 to $120.6bn in 2030 and $687.7bn in 2040. Beyond the forecast time horizon, anything is possible: “Longer term, the primary driver is Starlink becoming a connectivity layer for every data-transmitting device that needs reliable coverage beyond the reach of terrestrial infrastructure,” which I assume means broadband in space as we go boldly further.

Bear: Space is hard

SpaceX’s outlook depends on commercially unproven tech, including fully reusable Starship capable of hitting thousands of launches every year, orbital AI compute, direct-to-cell, and large-scale AI infrastructure. 

“Space is hard and future Starship and in-space anomalies should be expected, say the analysts. “Our $75 bear case assumes Starship slips to 2029 and AI monetization and deployment speed miss expectations, leaving Space and Connectivity at roughly 90% of valuation.”

And of course robots are hard too: “We estimate Starlink-connected robots account for roughly 34% of 2040 Connectivity revenue, supported by our 2.2bn global robot base estimate and Starlink penetration rates of 40% for autonomous vehicles, 33% for drones and eVTOLs, and 20% for other robots.”

Funding secured? 

MS says SpaceX is not FCF positive based on its forecasts before 2035, requiring, on average, ~$84 billion of external capital needs per year from 2027-2034. If debt markets cannot absorb this financing, SpaceX may have to issue equity, reduce growth investment, or slow deployment. “Ability to secure necessary capital is one of the greatest risks to our forecasts,” they write.